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More than five years ago, the state-run Maui public hospital system was transferred to become a wholly-owned, not-for-profit subsidiary of Kaiser Foundation Hospitals. At that time the hope was that this privatization model could be replicated on other islands, improving care and relieving the state of paying heavy subsidies for their operation.
That turned out to be unrealistic, at least for the foreseeable future.
The reality, say the officials most familiar with the public hospital network, the Hawaii Health Systems Corp. (HHSC), is that private entities are not waiting in line to invest in the largely rural hospitals and clinics that are, all the same, essential to provide care for Hawaii’s people and families of limited means.
The path toward a more sustainable future for these critical facilities is going to require a wider exploration of solutions to increase revenue and contain costs. House Bill 836 proposes a study on financial sustainability of the HHSC. One way or another, questions must be asked on how to maintain a core service.
Some questions already were aired by the House Finance Committee at a briefing in the days before the 2023 Legislature convened last month.
HHSC facilities are governed by regional boards. Maui’s board pressed for the privatization move primarily with the belief that private management could have the capacity to improve health services to the community, Linda Rosen, HHSC chief executive officer, told the Honolulu Star-Advertiser.
The regional boards that remain — East Hawaii, West Hawaii, Kauai and Oahu — are not as inclined to follow suit, Rosen added. The feeling in the private sector seems mutual.
The problems lie on both sides of the ledger. On the revenue side, the “payer mix” of the island populations the facilities serve don’t raise enough, Rosen said. Among the figures she presented to the House committee: Overall, HHSC patients are 60% Medicare- or Medicaid-insured, both services paying less in reimbursements than commercial insurance such as HMSA or Kaiser.
On the expense side is labor. State employees comprise the staff, Rosen said, and at the higher end of the pay scale. When Maui Memorial, Lanai Community and Kula hospitals were transferred to Kaiser under a 30 to 50 year lease, part of the deal was the roughly $30 million in state funds provided to employees to settle the loss of benefits in the transition to private employment, Rosen said.
Privatizing the rest of the HHSC system similarly would not come cheap.
There are also issues of deferred maintenance that make transitions less attractive to private buyers. That is why a $50 million allocation proposed by
Gov. Josh Green to expand Hilo Medical Center would be a rational choice. Neighbor island patients too often must be transported to Oahu for essential treatment, and Hawaii island’s primary acute-care facility is often over capacity.
Likewise, Kona Community Hospital surely needs critical repairs. The $20 million sought for that merits prompt attention.
Going forward, the statewide system must come into better fiscal balance. Hawaii’s congressional delegation has raised the issue of improving Medicaid and Medicare reimbursements.
In a 2019 letter sent to the Centers for Medicare and Medicaid Services, the delegation compared the disparity in reimbursement for an “initial observation care appointment” between Hawaii ($105.67) and Alaska ($137.92), another state with fragmented, rural populations.
Hawaii’s leaders must now redouble efforts to secure rates that are fair. It’s evident that Hawaii’s people have unmet health needs and must, at least for now, rely on the safety net that HHSC provides.
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